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Boots Group PLC

Boots Group PLC. Trading and corporate development update. 7 th April 2005. Sir Nigel Rudd. Chairman. Richard Baker. Chief Executive. Headlines. BTC and Group performance for 04/05 expected to be in line with revised market forecasts

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Boots Group PLC

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  1. Boots Group PLC Trading and corporate development update 7th April 2005

  2. Sir Nigel Rudd Chairman

  3. Richard Baker Chief Executive

  4. Headlines • BTC and Group performance for 04/05 expected to be in line with revised market forecasts • Lower consumer spending and infrastructure costs expected to lead to lower BTC operating profits in 05/06 • Proposed sale of Boots Healthcare International • Continued return of cash to shareholders

  5. 04/05 Trading update • BTC • Operating profit expected to be in line with March update at £470m • Weak sales in Q4 • Gross margin % -80bp for the year • BHI • Operating profit slightly ahead of expectations at £85m • Group • PBT in line with revised market expectations at £475m Note: All trading results estimated at time of going to press

  6. Boots The Chemists • Tougher retail environment underlines need to change • Improved competitive position in increasingly competitive market • Good progress on renewing operational infrastructure • Moving from unsustainable model to modern, competitive and efficient model

  7. Planning assumptions for 2005/06 • Sales growth expected to remain subdued • LFL growth 0 – 2% • New space contribution 2% • Stable gross margin expected • Continued investment in price • Cost of Goods improvement • Costs expected to be up 6% due to new space and infrastructure renewal

  8. BTC cost growth

  9. Intention to sell BHI • BHI concluding successful 4 year growth strategy • Strong organic growth prospects but significant investment required • Focus Group resources on making BTC modern, competitive and efficient • Completion within 05/06 financial year • Intention to return significant proportion of proceeds to shareholders

  10. Boots Healthcare International • 2004/05 sales £520m, +5.7% on a comparable basis • 2004/05 operating profit £85m • Operating in 130 countries with 2,900 staff • 5 manufacturing plants Nottingham (3), Germany and Thailand Other £140m Nurofen £150m Dermo- Cosmetics £50m Strepsils £90m Clearasil £90m Note: All trading results estimated at time of going to press

  11. Proposed sale and leaseback • 300 secondary properties identified • Expect proceeds in excess of £250m • Plan completion over the summer • Broadly EPS neutral • Proceeds used to pay down short term borrowings

  12. Capital structure and shareholder returns • Clear ongoing commitment to return surplus cash • £1.7bn returned to shareholders over the last three years • Significant proportion of BHI proceeds to be returned to shareholders • 2nd £350m tranche of share buyback to be completed over two to three years – matched to BTC performance • Dividend key element of delivering shareholder returns • Maintain strong investment grade debt rating

  13. Summary • BTC and Group performance for 04/05 expected to be in line with revised market forecasts • Lower consumer spending and infrastructure costs expected to lead to lower BTC operating profits in 05/06 • Proposed sale of Boots Healthcare International • Continued return of cash to shareholders

  14. Boots Group PLC Trading and corporate development update

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